There has been a lot of noise on cryptocurrencies and Bitcoin of late. While some suggest cryptocurrencies are a fraud, others believe them to be the next economic revolution the world has seen since the internet. Bitcoin has brought to light the interesting concept of blockchain technology which offers great potential for the agrifood sector. Yet it is far from being the panacea for diverse issues affecting the industry, at least not yet.

Simply put, blockchain technology is a way of storing and sharing information across a network of users in an open virtual space. Blockchain technology allows for users to look at all transactions simultaneously and in real-time. In food, for example, a retailer would know with whom his supplier has dealt with. Additionally, since transactions are not stored in any single location the information is almost impossible to be hacked.

For consumers, blockchain technology can make a difference. By reading a simple QR code with a smart phone, data such as an animal’s date of birth, use of antibiotics, vaccinations, and location where the livestock was harvested can easily be conveyed to the consumer.

Blockchain makes a supply chain more transparent at an all new level. It also empowers the entire chain to be more responsive to any food safety disasters. Massive organizations such as Nestle, and Unilever are considering blockchain technologies for that reason. Walmart, which sells 20% of all food in the U.S., has just completed two blockchain pilot projects. Prior to using blockchain, Walmart conducted a traceback test on mangoes in one of its stores. It took 6 days, 18 hours, and 26 minutes to trace mangoes back to its original farm. By using blockchain, Walmart can provide all the information the consumer wants in 2.2 seconds. During an outbreak, 6 days is an eternity. A company can save lives by using blockchain technologies. Blockchain also allows specific products to be traced at any given time, which would help in the reduction of food waste. For instance, contaminated products can be traced easily and quickly, while safe foods would remain on the shelves and not in landfills.

Blockchain will allow everyone to be paid more quickly, from farm to plate. Farmers could sell more quickly, and be properly compensated as market data would be readily available and validated. Blockchain technology could represent a legitimate option for farmers who feel compelled to rely on marketing boards to sell their commodities. The use of blockchain could prevent price coercion and retroactive payments, both of which we have seen across the food supply chain. Blockchain technologies could “uberize” the agrifood sector by eliminating middlemen and lowering transaction fees. This can lead to fairer pricing and even help smaller outfits desperate to get more market attention.

However, it will work only if the data at the source is accurate, as current practices in the industry are much more open to human error. Much of the compliance data is audited by trusted third parties and stored either on paper or in a centralised database. These databases are highly vulnerable to informational inaccuracies, hacking, high operating costs, and intentional errors motived by corruption and fraudulent behaviour. Blockchain operates anonymously, so mistakes would be traceable to individual culprits. Considering recent food fraud scandals, which we have seen in Canada and elsewhere, this feature is not trivial. Blockchain technology provides a method with which records are kept permanently. Most importantly though, it facilitates data sharing between disparate actors in a food value chain. Many retailers have sold fraudulent food products unknowingly. With the use of blockchain these days could come to and end.

Our current traceability systems need work, and blockchain technologies could be the evolution it needs. Given its architecture, blockchain technology offers an affordable solution to both SMEs and large organizations. However, there are noteworthy limitations. The amount of information which can be processed is limited. Since everything is out there, several contracts between organizations would need to be secured for some level of confidentiality to be retained. Balancing confidentiality with transparency would need to be worked out. The agrifood arena is filled with secrets. How blockchain technology is currently being deployed would be problematic for many food companies. For many, blockchain is just a solution looking for a problem.

Secondly, blockchain is really in its infancy and most are uncertain about its potential. Also, the innovation in blockchain architectures, applications and business concepts is happening rapidly. It’s a decentralised, open-source organism which is challenging to grasp for many, including governments. In food, innovation is always desirable until it becomes real. Once it manifests itself, guards go up. Some organizations are moving ahead while others wait to see what happens. The marketplace is currently fueled with confusion due to the Bitcoin phenomena, which is labelled by many as being irrational and ridiculous. Cryptocurrencies allow for transactions to occur while using blockchain technology, but it remains just an option.

Nevertheless, the most important challenge for blockchain technology remains participation. All parties must adopt the technology in order for it to work. In food distribution not all companies are equal, and some can exercise their power more than others. A successful integration of the blockchain requires the engagement of all participating organizations. Walmart’s blockchain will likely be successful because it’s Walmart. But thousands of companies have the same clout.

Regardless, blockchain technology in agrifood has potential but it needs work. Industry public leaders should embrace blockchain as an opportunity and should be added to a digitalisation strategy currently affecting the entire food industry. As such, transparency, productivity, competitiveness and sustainability of the agrifood sector could be enhanced. Nonetheless, research should look at how to generate evidence-based blockchain solutions to democratize data for the entire system before we get too excited.

We need your help to find the next Scotiabank Ethical Leader. For the past five years, Dalhousie’s Faculty of Management has recognized a Canadian who practices ethical leadership at our annual Ethics in Action event. Next year, for Dalhousie’s 200th anniversary, we are opening nominations globally. Any person in any part of the world is eligible.

Do you know of an ethical leader who we can honour with the 2018 Scotiabank Ethical Leadership Award? Please visit our nomination page.

Previous award recipients include Justice Rosalie Silberman Abella, Anna Tudela, Irwin Cotler, Richard Pound, Chief Phil Fontaine, and Sir Graham Day. These individuals, through their actions and decisions, have demonstrated character, courage and adherence to ethical principles. Leaders from any sector—public, private, or not-for-profit, are eligible to be nominated. The winners will serve as an inspiration to other practitioners and to today’s students.

We hope to see you at this years’ Ethics in Action event! For more information about the event, the Scotiabank Ethical Leadership Award, or the past recipients, please visit our website.

Loblaw is the latest grocer to commit to offering home delivery. Starting in December, the number one food retailer in Canada is looking at deploying this strategy from coast to coast. It intends to deliver food at home, for a fee of course –an ambitious plan indeed. After spending millions in making many of its stores cathedrals where food is adulated, like the Maple Leaf Gardens store in Toronto, serving up President’s Choice in people’s homes now seems to be good enough.

Basically, the socioeconomic fundamentals that have supported large, big-box stores are weakening rapidly. Real estate is not cheap, growing same-store-sales is difficult these days and finding good labour to cover large spaces is challenging. In fact, as higher minimum wages are adding more pressure, grocers need to think of ways to make their equity and human capital work more efficiently. What’s more, a good portion of the Canadian population will become less independent to some degree. By 2025, more than 8 million Canadians will be 65 or older. And if you add Canada’s unpredictable — and sometimes horrid — weather, these indicators point to one thing: the bricks-and-mortar model is becoming much less appealing for a growing number of Canadians.

Our modern lifestyle is also a factor. Quite simply, time-strapped consumers are looking for convenience. Those who can’t or don’t want to cook are also are looking for quick fixes, and that is exactly what the food retail industry is trying to offer. Grocers are increasingly attempting to chase down the money that is showing up at their doorsteps less and less often.

As a result, we are continuing to witness the slow death of the traditional grocery store. For one thing, an increasing portion of our budget is dedicated to eating outside the home. At almost 30% of all of money spent on food, Canadians are on track to breaking a new record this year. Secondly, most of us are online, shopping for anything and everything. And yes, food is part of that portfolio. About 5 years ago, barely 1% of our food purchases were made online. Today, some unofficial estimates suggest that number is now close to 4%. We are progressively catching up to the Americans, who are at 7%. And given Walmart’s recent results, online grocery shopping is expanding. Walmart’s online sales in the U.S. grew by almost 50% last quarter, a lot of which was food sales. Canada is seeing similar trends.

Even though grocers’ balance sheets in Canada are in fairly good shape, Amazon — the boogeyman of retailing — has become a legitimate threat since it took over Whole Foods this summer. Amazon is not just a business killer — it destroys entire sectors. The bookstore was its first victim, and since its acquisition of Whole Foods, we can assume that the grocery store is in Amazon’s sights. It is all about digital transformation for Amazon. It is redefining how the food industry and consumers make transactions in a digitalized, borderless world.

Among scalable home delivery businesses, Grocery Gateway was really one of Canada’s pioneers. For years, this fleet owned by Longo Brothers delivered food products in the GTA, while barely making a profit. In fact, Longo’s acquired Grocery Gateway back in 2004 from a failed dot-com project, a victim of the bubble in that industry. For 13 years, the competition stood back and did nothing, for fear of cannibalizing a fellow market grocer. Several questioned the sustainability of operating a full fleet of trucks while at the same time charging a hefty premium of 15-20% on an order of 50$. But Grocery Gateway learned from this, and is now expanding. For Longo’s, it was about running a good business. For Loblaw, it is about fighting the Amazon effect, which is why we are about to see an evolution in home food delivery.

Leveraged by data, connecting food retailing with homes can be powerful. In some U.S. cities, Walmart is currently delivering food directly to the consumer’s fridge. Imagine coming home and everything is already done for you. But in 10 or 15 years from now, in a revolutionary digital world, there is no limit to what we can do with home food delivery.

As an example, we could even see companies owning the food we receive, and only pay for the food we use and consume. Food in concession, so to speak. Food waste?No problem. Leftovers can be credited, resold on our behalf, and used for something else. Zero waste. Similar gains can be achieved on the nutritional front. Consumers could be wearing a portable device automatically telling their fridge it is time to get replenished to satisfy a customizable diet. The “fitbitization” of our food could allow for companies to deliver to our fridges and cupboards the food we need to better our health. Home delivery makes grocers face up to a more informed consumer. All the data consumers need is readily available online, where they can also shop at their own pace. It makes consumers more rational, so impulse buying would be nearly impossible –a scary thought for many food companies out there. In return, grocers will need to embrace precision retailing practices in order to match higher expectations. All of this becomes more conceivable with home food delivery.

A blend between a digitalized food retailing industry and our homes can seem incredible, and this is only the beginning. Grocery Gateway was more of an experiment. Loblaw, and likely others, may be playing defense for its long-term survival, but the opportunities are endless.

The Amazon effect is real, and it is here to stay and is keeping most grocers up at night, including Loblaw. Well, at least, Loblaw had the foresight of acting now before it is too late.

“We’re very pleased to have been able to work with colleagues from the University of Guelph as we developed this year’s Canada Food Price Report. Canadians want to know what will impact the prices of their food. Our report continues to provide them with the information they are looking for – around food quality, trends and impacts on the price of food in their region of the country.”

Sylvain Charlebois, lead author of the report, and Dean of the Faculty of Management at Dalhousie University.

This is the 8th edition of Canada’s Food Price Report, published by both Dalhousie University and the University of Guelph. Some of our predictions for 2017 were realized, but most of the food categories were affected by a significant structural change, which started in September 2016. We believe major discounting and disruption within the Canadian food distribution landscape caused by the increasing pressures coming from Walmart, Costco and Amazon led to this major shift in the market. Coupled with these sectoral changes were misleading macroeconomic forecasts set forth by most financial institutions 12 months ago. Most believed the Bank of Canada would decrease its overnight rate in 2017, and that the Canadian Dollar would be below $0.70, in comparison to the U.S. Dollar. However, the Bank of Canada increased its rate, twice, and the Canadian Dollar is now worth more than $0.78. Both events contributed to keeping prices much lower than predicted, in some categories.

Food inflation over the last 12 months has been reasonable for Canadian households, a trend which is expected to continue. In 2018, food prices in Canada are expected to rise 1% –3%. This is a slightly lower estimate than last year’s forecast, but still higher than what we have experienced to date in 2017. Annual food expenditure for a family of 41 is expected to rise by $348 to a total of $11,948 in 2018.

Vegetables and food purchased at restaurants are expected to see the highest increase in 2018. Vegetable prices are expected to be affected mainly by unaccommodating climate patterns. The food service industry is expected to be responsible for 59% of the anticipated food expenditure increases in 2018. The average family is expected to spend $208 more when eating out. In other words, we expect the average Canadian family to increase its food-away-from-home expenses by almost 8% in 2018. The average home is expected to spend almost 30% of its food budget in food service, the highest level in history.

While the province of Saskatchewan surprisingly experienced the highest increase in food prices, Nova Scotians saw their food prices drop by more than 1% overall in 2017, to date. But for 2018, food price increases are expected to affect most provinces, including the Atlantic Region and British Columbia. The Atlantic Provinces will likely see food prices go up, after a year of food price stagnation. For British Columbians prices will continue to increase, due to a higher general inflation rate. Both Ontario and Alberta will be faced with a more competitive marketplace, which will entice grocers to keep prices low. Higher minimum wages will not have an impact on food prices, since most companies are finding innovative ways to cut operating and labour costs and the focus on protecting margins will be enhanced as a result.

Food price increases in Quebec should follow the Canadian average. But generally, we expect food inflation to be somewhat consistent with the general inflation rate for 2018, across the country. However, there is consensus that the aggressive discounting strategies being employed by major grocers cannot continue indefinitely.

Major food topics for 2018 are expected to be the ongoing aversion to animal proteins, the new Canada’s Food Guide, and the rise of the Grocerant.

Loblaws, Sobeys, Metro, Wal-Mart and other companies have acknowledged the ongoing investigation. The outcome of the inquiry will likely not amount to much, but it does raise the question: Why is bread is being targeted by the bureau?

Demonstrating beyond a reasonable doubt that grocers are colluding to keep retail prices artificially high is almost impossible. Several attempts have been made in the past, with mixed results.

The average grocery store carries well over 30,000 different products, and prices can be affected by an array of factors: Commodity prices, energy and labour costs, new food safety and packaging regulations among them. These and others factors can all influence price points in many categories more or less simultaneously. An intentional collusion to falsely inflate profit margins would be hard to prove.

On the whole — unlike prices for fruits, vegetables and even meat products — bread has been immune to fluctuating prices for some time. In fact, Canadians have access to the most affordable food basket in the world.

Canadian food prices are relatively low

Nonetheless, since we live so close to the United States, where food quality is generally questionable but amazingly cheap, we often believe our own food prices are unfairly high. Prices are indeed higher here than in the United States, but much lower than in many places around the world.

In the last month alone, food retail prices have dropped in Canada, including bakery products. So, to suggest that food prices are inflated in Canada is somewhat far-fetched. And if Canadian consumers are paying too much for bread due to price-fixing schemes, the evidence isn’t readily apparent.

At the centre of this investigation, however, is a much deeper problem that lies in the food supply chain.

For years now, grocers have engaged in an open war with food processors, with grocers trying to position themselves as protectors of the public interest by pushing vendors to lower prices in order to remain competitive.

For the past few years, tensions between grocers and vendors have been at an all-time high. Major grocers have demanded price cuts from suppliers, causing a domino effect on the entire industry.

Small grocers complain

So, it’s not surprising to learn that independent grocers, through an industry association, passed along their concerns to the Competition Bureau. Consumers have barely noticed the conflict. Until now, that is.

Almost by design, the Competition Bureau may be trying to communicate to the market that grocers are on watch for squeezing processors.

As a food staple, bread is an appealing target. The bureau could have selected any food product, but bread’s status as a staple makes it an obvious choice — a clear majority of Canadians eat bakery products almost daily and, as a result, its price is an ongoing concern.

Everyone loves bread. That’s why Canada’s Competition Bureau might have chosen it to make a point to big grocers about their treatment of food processors.(Shutterstock)

It was chosen for a reason: To make an otherwise dreary, obscure, supply-side issue more imperative to the daily lives of consumers.

Publicly traded companies extorting each other is less of a political or PR concern than allegations that grocers are allegedly gouging consumers. The investigation will likely not yield material results, but bread is clearly the best medium through which the bureau can send its message.

It’s not likely any grocer will be accused or arrested any time soon, but the Competition Bureau investigation could potentially restore peace within the food industry family.

Probe could bolster the food sector

A vibrant food sector is not possible without a strong food-processing sector, and making sure all make a decent profit within the food industry is difficult.

Nonetheless, consumers can only benefit if all sectors, from farm to table, succeed over time: we end up with a greater variety of decently priced, high-quality, innovative food products. Ultimately, and without sending anyone to prison, this investigation could strengthen the food sector.

Grocers know better than to engage in a doomed strategy of quotas and illegal price-setting activities. The mere spectre of a grocery cartel would not only be bad business, it threatens to tear up the social contract with the Canadian public that they adhere to every single day.

Consumers can expect to see deals being made within the industry in the days ahead.

Food shoppers will almost certainly experience rebates in the bakery section as grocers rush to reassure their customers that a bread cartel in Canada is nothing more than a myth.

Minimum wage hike ignores impact of Artificial Intelligence

The minimum wage is rising in many parts of Canada. Recently, Ontario’s Liberal government announced it’s hiking its minimum wage to $15 an hour, matching the move by Alberta’s NDP.

In the United States, the push for a higher minimum wage began in 2013 when brave fast-food workers in New York walked off their jobs. The movement, known as Fast Food Forward, was aimed at fast-food chains but garnered political attention, prompting changes in the minimum wage across the United States. To date, several cities and the entire state of New York have adopted minimum wages for various workers. In 2018, San Francisco will become the first city in the U.S. to have a $15-an-hour minimum wage. Vermont, Hawaii and a few other states are also gearing up to pass a $15 minimum wage next year.

Implications of this change for the agriculture, food processing, retail and even food service sectors will be momentous. Alleviating poverty and wealth redistribution are certainly key drivers. But beyond the politics, there is much more to it than just wanting to provide the working class with better wages.

Let’s start with farming. Agriculture is becoming more digitized.Drones are used to spread the proper amounts of fertilizers. Cows are milked by machines throughout the day. Many industrialized poultry and egg farms have one worker, who likely earns more than $15 an hour, to ensure that the operation’s information systems remain in working order. The trust in machines is palatable. For Canadian agriculture to keep its level of competitiveness, change is inevitable. In fact, to keep workers in rural Canada, higher wages are integral.

An agricultural drone in the southern United States monitors crop vigour, insect infestation and fungal infection. (AP Photo/Johnny Clark)

In food processing, where working conditions are at times much less enviable, most workers earn more than $15 hourly already. Such a threshold won’t make much of a difference. Automation and business analytics are making inroads in this sector. Required skillsets are changing and employees need to be trained for optimal usage of state-of-the art technologies. Companies will capitalize their operations only if they have the right people to use newly acquired assets, and that tends to cost more money, and translates into higher wages.

A $15 an hour minimum wage will likely not put more pressure on operational costs for the near future. In fact, it may entice these sectors to adopt new technologies sooner.

Retail, though, is different. More than 26 per cent of workers in food retail and hospitality earn wages much lower than $15 an hour. Many small- or medium-sized enterprises and specialty stores rely on a lower minimum wage to keep a decent level of service. Small enterprises and start-ups, often credited for being key job creators in our economy, will struggle with this new constraint.

Larger outfits have anticipated a higher minimum wage for quite some time. McDonald’s, for example, is now installing more automated tellers so that customers can place orders by using an intuitive touch screen. As with farming and processing, these companies rely on quality continuance to support their business model; accordingly, a highly qualified workforce capable of using sophisticated technologies only makes sense.

Most of the larger chains will survive and do well regardless of a higher minimum wage. But for smaller restaurants in which human interaction is considered a welcome difference from big chains, a $15 minimum wage will become an impediment to growth.

A minimum income for all?

For the workers themselves, implementing a higher minimum wage is a double-edged sword. Several studies suggest that higher minimum wages will discourage small enterprises from creating jobs. That is a known fact. Other than students who need extra cash to support their education, many baby boomers retiring who are either bored or have not saved up enough for retirement are working in these jobs. Moving too quickly on the minimum wage could very well penalize those who governments are trying to help.

But what needs to be underscored is the seismic shift currently affecting the food industry. The $15 minimum wage battle is a provisional solution to a complex issue. The rise of Artificial Intelligence will force us to rethink how we produce, process and distribute food. Human beings may have very little to do with food production in the years to come – or at least much less than they do today. Some estimates suggest that more than half of the workforce involved in food businesses could disappear within the next 30 years due to AI.

Decades from now, when looking at what is happening in food from farm to fork, a guaranteed minimum income for all is likely inevitable. AI will change the food industry landscape to farms without farmers, processing plants using robotics, distribution centres operating with barely anyone in them and restaurants becoming more automated. AI has reached the point where it can do a better job than humans, especially when consistency and quality control are at the core of a business.

Given its capital-intensive nature and its risk- mitigating infatuation, the food industry is likely to embrace the consistency provided by AI. However, food is about connecting and sharing, and consuming food is intrinsically human. In this light, AI does have limitations.

Nonetheless we should put minimum-wage politics aside and instead envision the landscape a few decades from now. In doing so, it becomes clear that the $15-an-hour argument lacks scope and is nothing more than a vote-grabbing scheme. What’s really at stake is the human face of food retailing and service, and how we can provide a decent living to those affected by the next technological revolution.

The Grocerant: How smart grocery stores are becoming hybrids

“Grocerant” is a new term that describes what smart grocery stores are becoming – a place for shoppers not only to stock up on essentials, but also to buy high quality prepared meals that can be taken home or eaten on site.(Shutterstock)

Food trends are difficult to follow these days. Just like hip sectors like tech, the food industry is coming up with its own peculiar lingo when describing market shifts.

One of the latest examples is “grocerant,” a word combining “grocer” and “restaurant.” The term has been around for a few years, but it seems to have gone mainstream in recent months. Or at least it’s a term most of us will be hearing more often.

But as trendy as it is, the term “grocerant” is also in fact quite relevant and accurately captures what is happening in the food industry these days. In short, a grocerant is a grocery store that sells prepared meals, to either eat on site or take home.

Efforts to offer more convenience are resulting in numbers not seen since the drive-through phenomenon several decades ago.

In Canada, while the numbers are little more obscure, we are seeing similar trends. Many retailers are on the move.

Given that convenience seems to have more currency than ever before, two worlds are currently colliding in the ready-to-eat space at grocery stores, which caters to people seeking portable solutions to accommodate their hectic daily lives.

Grocerants offer a one-stop-shopping solution for consumers driven by either curiosity or a lack of time. An increasing number of grocery stores now allow customers to buy and eat on the spot. Some stores in Canada and the U.S., including several independents such as Longo’s and even larger outfits like Loblaw, Sobeys and Metro, deftly merge both food retailing and food service under one roof.

Grocery stores challenging restaurants

Research suggests many consumers generally perceive grab-and-go food products to be healthier than meals you can get at a restaurant. This works well for grocers.

Price wars constitute the other driving issue for grocers. Over the last 15 months in Canada, food retail prices have barely moved. But the price of food purchased at restaurants has increased significantly, more than double the general inflation rate.

This would suggest that menu prices are much more immune to market cycles than retail food prices. Demand in food service is inherently more inelastic, so margins can be kept up and defended in most cases, no matter what the economy is doing.

But restaurants aren’t staying quiet in the face of this new trend. Restaurant operators are fighting back by using technology to their advantage. Many are responding by using UberEats and other food delivery services, even expanding their market by offering meal kits and developing new ways to reach consumers.

In other words, they are trying to go where the money is instead of just waiting for the consumers to come to them.

Some say it’s all about millennials. It is indeed about offering fresh, healthy, reasonably priced products for the largest generation that is slowly taking over the economy.

Aging baby boomers have an impact too

But the changes are more deep-rooted, beyond just millennials. Millennials certainly have the economic influence to trigger the changes we’re seeing, but many demographics are behaving differently around food.

Families with older children like the enhanced grocerant experience, while aging baby boomers need the convenience. The appeal is across the board. Millennials were the first generation not willing to settle for what was being offered to them by grocery stores. The rise of the grocerant represents the awakening of an industry that’s been complacent for quite some time.

In the realm of the convenience factor that’s a critical part of the grocerant movement, the ready-to-cook market is also emerging as an interesting opportunity, but not without some headaches.

In the U.S., Blue Apron, the largest and best-known meal-kit provider in the world, is waging an uphill battle. The company has just laid off six per cent of its staff and its stock has gone nowhere since going public in June.

Grocers do have the capacity to cover a broader market with their product offerings, but have not yet made much of a play on meal delivery and quality.

Grocery chains, in fact, are often not hardwired to successfully meet new challenges. But that’s slowly changing. Metro made a significant move this year by acquiring Miss Fresh, and many expect other grocers to follow suit.

In processing as well, Campbell’s Soup, Unilever and many others are investing in meal kits to explore what could become a US$10 billion industry by the end of next year.

It’s all a growth opportunity that cannot be overlooked by grocers. They’ll need to hire the right people, with the right mindset, in order to capitalize on these new opportunities. And because of changing consumer expectations and behaviours, survival seems unlikely for stand-alone meal-kit outlets.

So the convenience food battle is alive and well. Grocers were losing for a while, but the emergence of grocerants across the country is a sign that the industry is listening to what the modern consumer is telling them.

“Amazon is essentially about merchandizing convenience for all. Organics, meal kits, it’s all about convenience. For years, Walmart mastered the concept of simplicity in a big box store. On the other hand, Amazon is hedging against the indolent nature of mankind. And for that, it’s winning.”

Sylvain Charlebois

Amazon is not wasting time. Speed of execution is at the essence of Amazon’s model. As soon as U.S. regulators approved its acquisition of Whole Foods, it announced that it would aggressively reduce the price of several organic staples in all of the 431 Whole Foods stores in America and Canada. Amazon’s playbook is about low margins and high-volume sales, for anything, including organics.

Technically, Whole Foods was in a free fall before its acquisition. Store traffic was shrinking, sales were sluggish and the company was having difficultly convincing shareholders that organic food sales are immune to economic cycles and pose a bright future for the company. Whole Foods reinforced the fact that organics were, for the most part, exclusive and for the elite. Organic groceries can cost consumers almost twice as much as conventional food products. Margins are also a sweet deal for grocers, as they can be as much as 5 times of what it would be for mainstream food products.

Amazon obviously knows all this and intends to make organics more affordable, more democratic. At the same time, it also expects to make a statement as a change-agent in groceries, putting everyone on notice. Slumping stock prices for main grocery chains in the U.S. show Amazon certainly has the market’s attention.

This is not the first time a giant food retailer attempts to make its mark in organics. Through its influential logistics, Walmart has made organics more affordable over the last decade or so, however with mixed results. When it committed to organics, Walmart wanted to offer well over 140 different organic products to its customers, but failed miserably. Walmart soon found out that the realities of organic farming make accessibility more challenging. Over the years, it adjusted expectations by offering fewer but cheaper products. Today, Walmart is now the largest seller of organic food products in America. Amazon, on the other hand, has Whole Foods, the Mecca of organic food retailing, giving it a huge advantage over Walmart. By acquiring Whole Foods, Amazon gave itself access to an incredible eco-system which includes well-established organic farms and wholesalers. Unlike Walmart, Amazon can execute its strategy almost instantaneously.

And so, it begins, but it remains unclear as to how all this will affect the Canadian organic market. Unlike in the U.S., food prices in Canada have started to rise again in recent months which has given grocers some well-needed breathing room. If anything, we could see organics go up in price due to Amazon’s willingness to make organics more appealing to American consumers. With higher demand south of us, procurement could become more challenging for main Canadian grocers, even if our currency remains strong against the greenback. With time though, as Amazon increases its footprint in Canada, this may all change.

The American food distribution landscape is much different, especially these days. With German-based Lidl and Aldi also expanding in the U.S., Americans may witness a continued food price war. Except for July, food prices have dropped for 18 months in a row, the longest stretch since the 1950s. Pricing always has a very direct short-term impact on profitability. Over time though, survivors are the ones able to absorb shocks coming from the competition. Since Amazon has never played the high-profit, high-dividend game, this is a non-issue for the company. But with organics, the Amazon-Whole Foods story will only make matters worse for Kroger and Cie. Convenience, for organics, is the primary factor, price is less so. The physicality of organic retailing coupled with online selling can only leverage Amazon’s position in the market place. The distribution story behind Amazon’s move on Whole Foods makes the online giant almost immune to any procurement challenges which is typical with organics.

Amazon’s next move could be with meal kits. For years, grocers have considered food service as an afterthought. Given that some project that the online food service market is likely to increase 15 times faster than the rest of the restaurant business by 2027, some are starting the move. The first one in Canada was Metro. Metro’s brilliant move of purchasing MissFresh this summer is evidence that grocers are starting to see the potential, but it has been slow. Amazon is clearly not as patient.

Blue Apron just announced it was reducing its sales force to better calibrate sales with capacity. Several start-ups have emerged and have done well, but no one has proven that the meal kit business can be sustainable for the long term. Many must spend an outrageous amount on marketing and set very high price points for their products. It is easy to see how Amazon can clarify the essence of the meal kit space by using its massive data-driven schemes.

Amazon is essentially about merchandizing convenience for all. Organics, meal kits, it’s all about convenience. For years, Walmart mastered the concept of simplicity in a big box store. Amazon is quite frankly hedging against the indolent nature of mankind. And for that, it’s winning.

How technology will help fight food fraud

A worker handles meat at the Doly-Com abattoir in Romania in 2013 when Europe was facing a scandal over incorrectly declared horsemeat. The problem of food fraud and its health and economic implications affect a broad range of foods around the world, but technology could soon end the problem.(AP Photo/Vadim Ghirda)

Food fraud can take many forms. It can include adulteration — substituting one ingredient with a much cheaper one — or misrepresentation, which may include selling a product as organic when it is not.

Canadian food fraud cases abound

Food categories that are more vulnerable to food fraud are fish, seafood, liquids, spices, fruits, vegetables and meat products. Canada has seen its share of cases in recent months, one of the most notable ones is Mucci Farms in southwestern Ontario, near the tip of Lake Erie. The company was fined $1.5 million for selling Mexican tomatoes as a product of Canada. Mucci Farms denies that the labelling was intentional and faults their computer system.

The number of cases is adding up. The Canadian Food Inspection Agency has received over 40 complaints in 2016 and industry observers expect that number to increase in 2017.

Serious health and economic risks

Some may believe that food fraud is a victimless crime. This is not so. What is at stake is the entire food economy.

For any food business to grow and offer high-quality food products, it requires consumer trust. If trust is lost then everything the industry is trying to accomplish will become more challenging. Why would consumers pay more for a product they may deem fraudulent?

The majority of food companies are ethically sound, but you only need a few cases to damage the reputation of an entire industry.

Most importantly, the Dalhousie study suggests that consumers with allergies or intolerances to particular foods are likely to feel more vulnerable than other consumers when thinking of food fraud. Consequently, food fraud is as much a socioeconomic issue as it is one of public health.

Technology a partial solution

But these measures can only do so much. Companies can’t really report fraudulent rivals for fear of retaliation — food companies denouncing fraudulent cases are themselves accused of food fraud. They can’t win.

Regulators would have to sample-test everything, which would be operationally impractical and, frankly, impossible. Public regulators have been aware of the issue for quite some time but have struggled to find any solutions to address the issue.

A few provinces, including Ontario, have created provincewide committees on food integrity to work with industry in finding fraudulent cases. However, their work will take a while before we see anything new.

Exercise caution

Meanwhile, consumers should shop for food and visit restaurants with extreme prejudice. Consumers should look for consistencies in pricing and quality. If a food product is much cheaper at one outlet, perhaps the deal is too good to be true. Consumers should also ask pointed questions about procurement strategies to retailers and restaurant operators to make the supply chain more transparent to them.

But humans are humans and food fraud has been going on for more than 2,000 years. The first known reported cases go back to the Roman Empire when suspicions around adulterated wines and oils were prevalent. Today, however, we have technologies allowing us to detect fraudulent behaviour.

One day though, consumers empowered by these technologies will become the most powerful regulators the food industry can ever imagine. Knowing that consumers can ultimately test the integrity of any product, the entire food supply chain will need to be more disciplined and the rotten apples will need to go, no pun intended.

Over time, humans themselves may not get rid of food fraud but technology will.

“This time around, Health Canada did the right thing: It listened to Canadians. A good first step indeed, but the new food guide will greatly impact our agrifood sector, and we need to be ready for this.”

Sylvain Charlebois

Health Canada has recently released the set of principles it intends to adhere to for our next food guide. Health Canada’s message signals a complete revamp of our colourful rainbow of food groups. For example, it appears that a plant-based diet will be strongly encouraged. We might even see a focus on more plant-based proteins like beans, lentils, nuts, and tofu. This would represent a significant departure from what we have seen in our food guide since its establishment in the 1940s. Health Canada is also suggesting even more significant changes, making many traditional sectors in agriculture quite anxious.

While the current format of groups and colours has proven convenient and simple, the proposed changes aim to adopt a nutrition-based approach. It will likely group together proteins, and it will also apply to all dietary needs, vegan or vegetarian lifestyles included. It probably won’t abandon outright the main staples Canadian consumers have embraced for decades, but the food guide will look different, and feel different. The next version will essentially acknowledge, at last, that Canada has a dynamic, heterogenous food market. It will also encourage Canadians to drink more water, and entice them to cook more and to eat together — all good news.

Our current food guide clearly has baggage. The intent of the first food guide, back in 1942, was to entice demand for Canadian commodities during the Second World War. In those days, concerns for food security were acute and needed to be addressed by making Canada a food-sovereign nation. Agricultural embargoes were used more often back then. But with the development of a more open food economy, things have changed. With this shift in food geopolitics, consumers now have different choices as well as different expectations.

Where things went too far was when commodity-driven recommendations were incorporated into the guide, supported by questionable science. For example, encouraging Canadians to have two cups of milk per day in adulthood is just absurd. We are one of few countries still advocating this. Dairy Farmers of Canada may not like this but Canada in 2017 is a different place. Many immigrants just don’t drink milk. As well, many other consumers suffer from intolerances and allergies. We have many more choices than we had in 1942.

This time around, Health Canada did the right thing. It listened to Canadians. More than 20,000 Canadians have responded to Ottawa’s consultations which made this process more open and democratic than ever before. Parents, teachers, physical education professionals and fitness enthusiasts, culinary experts, and many more community-based groups, including food banks, all got involved. This is exactly what our country needed.

The principles suggested by Health Canada show that they are now willing to adopt a food guide primarily for Canadians. However, the next food guide may be at odds with some of our current agricultural policies. The supply management system, our protectionist system of quotas and tariffs, signifies to Canadians that our dairy sector, for example, is vital to our agricultural economy and that we want to protect it. Our dairy sector’s economic contribution over the years has been unparalleled. However, consumption of milk per capita in Canada has dropped significantly over the last few decades. A new direction with the food guide could entice Canadians to move even further away from milk, compromising the welfare of many farms across the country. The same effects will be felt in our cattle industry. The beef industry deserves a future as well. As we put consumers first, which we should, we also need to reflect on what will happen to Canadian farming. The next food guide will make the disconnect between Canadian agricultural policies and food consumption much more obvious. Our new Canadian food policy framework, currently being considered by Agriculture Canada, will need to address this gap.

In the end though, what matters most is how the guide will resonate with citizens and how it can be used. This will not be easy. The current version is really a tool for elementary schools, and not for consumers looking for answers for themselves and their families. Perhaps Canada will need two guides: one for health professionals, and the other for regular consumers. Both would be designed to achieve similar outcomes, but messages would be articulated differently. For the consumer version, the economics of food should also be recognized. Food is expensive, and all consumers — not just the privileged ones — should be aware that they have options.